Topic 7 - Company Income Taxes Flashcards
What do basic financial accounting subjects assume about company income tax?
What are the three areas important when accounting for income tax?
The valuation/recognition of assets/liabilities in accounts is based on two different sources:
What do the differences between accounting regulations and taxation law lead to?
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What does the balance sheet approach of taxation compare?
- compares the carrying amount with their tax base at the same point in time
tax base = asset / liability value for taxation purposes
(based on taxation law)
What do the temporary differences between carrying amount and tax base lead to?
Why are they called temporary differences?
They are called temporary differences because:
(see the last point on slide)
What are the tax effects of temporary differences if the carrying amount of an asset / liability differs from its tax base?
What are the reasons for temporary differences between the carrying amount and the tax base?
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Write the journal entries to record the deferred tax liability.
Write the journal entry for:
(1) Prior year tax loss (or tax credits)
(2) Recognition of the use of tax credits
How do revaluations of non-current assets create temporary differences between financial accounting and tax law?
Why do deferred tax assets/liabilities occur?
What changes in depreciation occur regarding tax base/carrying amount?
Provide two solutions (for (1) and (2)) to the following example of the tax effect of revaluations:
An entity owns land, cost $1, 000, (1) fair value $1, 200, (2) fair value $800, tax rate is 30%.
For both solutions, provide the following:
a. The revaluation of land
b. The effect of the revaluation
